MMA letter to governor urges support for local aid accounts in FY17 state budget

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His Excellency Charles Baker
Governor of the Commonwealth
State House, Boston

Dear Governor Baker,

On behalf of the cities and towns of the Commonwealth, the Massachusetts Municipal Association is writing with comments on H. 4450, the fiscal 2017 budget bill enacted by the Legislature late yesterday and sent to you for review and approval. The investments in local government made during the budget process clearly demonstrate the abiding commitment that state leaders have to embracing a strong fiscal partnership with cities and towns.

We thank you for continuing to support essential municipal and school programs, and for protecting local government from proposals that would restrict or interfere with their management authority and decision-making powers. As we explain below, in addition to requesting that you approve the local aid funding in H. 4450, we ask you to veto Section 45, which would interfere with local retiree health insurance decisions and lead to increased municipal OPEB liabilities.  

Unrestricted Municipal Aid
City and town officials across the Commonwealth greatly appreciate the $1.022 billion appropriation for Cherry Sheet Unrestricted General Government Aid (UGGA) (1233-2350) that will help cities and town balance local budgets in fiscal 2017 and ease reliance on the property tax. The $42 million increase reflects the municipal aid revenue sharing framework in your budget recommendation filed in January. The MMA and local officials know that this much-needed increase in unrestricted municipal aid originated with your budget proposal, and we are deeply grateful.

Chapter 70 for Municipal and Regional Schools
We strongly support the $4.628 billion Chapter 70 school aid appropriation (7061-0008) included in H. 4450.  This $116 million increase accomplishes several vitally important objectives. First, the appropriation ensures that all municipal and regional school districts will be able to reach the “foundation” level of spending. Second, the Chapter 70 funding in H. 4450 would provide a minimum aid increase of $55 per student to every community and school district in fiscal 2017. The vast majority of communities and school districts are only eligible for minimum aid. The below-inflation amount of $55 per student is not sufficient to maintain existing program levels, and thus minimum aid cities and towns have adopted budgets that rely on the $55 per student increase and a larger appropriation from local revenue sources. Third, the provision continues to implement the “target share” equity commitments made by the Commonwealth ten years ago. And fourth, H. 4450 seeks to address the problems created by undercounting low-income students by providing funding in the Chapter 70 distribution to protect those communities that have been impacted.  

Over the long term, we underscore the importance of implementing the school funding reforms embraced by the Foundation Budget Review Commission (FBRC). This will be the most effective way to address the funding shortfalls in the increasingly obsolete and inadequate foundation budget framework, and we look forward to working with you and the Legislature to implement these needed upgrades to state support for K-12 education.  Without the improvements recommended by the FBRC, school budgets will not be able to keep pace with inflation, let alone make the investments needed to maintain quality and enhance student achievement.    

Special Education “Circuit Breaker”
We support full funding of the state’s share of high cost special education placements, a formula that is set in state statute. The cost of providing special education services has grown to nearly $3.5 billion annually, according to the Department of Elementary and Secondary Education (DESE). The circuit-breaker reimbursements help pay for services that communities provide to approximately 10,000 high-cost students with disabilities in school districts across the state. We respectfully ask you to support the appropriation of $277.3 million (7061-0012) provided in H. 4450. Unfortunately, while this represents a $5.56 million increase above fiscal 2016, we believe this amount is $4.4 below what is needed to fully fund the program in fiscal 2017, and we look forward to working with your Administration to close this gap during the year ahead. The special education circuit breaker is an important state-local partnership, and full funding is an important budget priority for cities and towns.

Reimbursements for Charter School Losses
The diversion of Chapter 70 school aid away from local public schools to fund charter schools has placed a major and growing financial burden on cities and towns, a problem made more acute as the state grants more charters and existing charter schools expand. Local officials strongly support full funding of the Commonwealth’s statutory commitment under section 89 of Chapter 71 of the General Laws to reimburse school districts for a portion of their Chapter 70 aid that is redirected to fund charter schools.

For fiscal 2017, it is estimated that cities and towns will be assessed $537 million in local school revenues to fund charter schools, an amount equal to nearly 12 percent of all Chapter 70 dollars. With assessments at more than a half a billion dollars and growing, it is critical for the state to fund its financial commitment under the law.  

The state fully funded the reimbursement program in fiscal years 2013 and 2014, but is underfunding reimbursements by approximately $46.5 million in fiscal 2016. The Legislature’s final fiscal 2017 budget would level-fund charter school reimbursements at $80.5 million, a lower amount than was included in any of the budgets passed by the House and Senate earlier this spring. Because of charter school expansions, this is not enough to keep pace, and communities will see even greater shortfalls in fiscal 2017 as a result. The charter school reimbursement issue is particularly acute for a large number of the state’s lower-income communities, because shortfalls in reimbursements from the state are exceedingly difficult to offset at the local level due to severe constraints on local revenues and thinly balanced budgets.

Please Protect Municipal Decision-Making Authority on Retiree Health Insurance by Vetoing Section 45
On behalf of the cities and towns across the state, we strongly oppose Section 45 in the Legislature’s budget, and ask you to veto the provision. Section 45 would interfere with local officials’ decision-making authority to act on behalf of their taxpayers on the basic issue of contribution levels for retiree health insurance. This provision would penalize all cities and towns that have used the 2011 municipal health insurance reform law to reduce the cost and financial burden of health insurance for employees, retirees and taxpayers.

Specifically, this language would strip these cities and towns of their legal authority to decide whether to adjust contribution percentages for retiree health insurance, by unilaterally extending a freeze in contribution ratios. There was a 3-year freeze in the original consensus reform law, but, unfortunately, two years ago the freeze was extended to 5 years. Now, this provision would seek to extend the freeze to 7 years – an unacceptable imposition on local authority that would have the state interfere with responsible health insurance policy decisions in each community.   

Under Chapter 69 of the Acts of 2011 (the 2011 municipal health insurance reform law), any city or town that used sections 22 or 23 of Chapter 32B to implement plan design changes or join the GIC was prohibited from changing retiree health insurance contribution percentages until July 1, 2014. In 2014, the temporary freeze was extended for two more years, until July 1, 2016, for any municipality that adopted or was planning on adopting provisions of the 2011 municipal health insurance reform law.

Section 45 would reverse planned contribution changes in some cities and towns, and would delay the ability to take action on retiree contribution percentages in many others. Simply put, this outside section would impose significant budget problems in many communities and interfere with sound fiscal planning. The original short-term temporary freeze was part of the compromise brokered by House and Senate leaders in 2011 that led to the enactment of the landmark municipal health insurance reform bill. Repeated extensions of the freeze would undermine that agreement and would clearly undermine the ability of cities and towns to control health insurance costs and save municipal jobs.  

Cities and towns are facing a staggering $30 billion unfunded OPEB liability. Section 45 would eliminate one of the few tools that communities can use to reduce this burden on local taxpayers. Please reject this ill-timed and ill-conceived provision.

Regional School District Student Transportation Reimbursements
Funding for transportation reimbursements to regional school districts (7035-0006) is vital to all regional districts and their member cities and towns, particularly in sparsely populated parts of the state. We applaud the Legislature for adding $2 million to this key account in H. 4450, and support the $61 million appropriation that is before you. As you know, the state is far below the 100 percent reimbursement that was pledged as an incentive for communities to regionalize, so the $61 million request is quite modest in that context.

McKinney-Vento Homeless Student Transportation Costs
In fiscal 2013, the state budget provided $11.3 million to fully fund the state-mandated costs that resulted from the Commonwealth’s adoption of the federal McKinney-Vento Act. The State Auditor ruled that the McKinney-Vento program was an unfunded mandate on cities and towns, and we appreciate the action taken to provide full funding soon after that ruling. Under the program, communities are providing very costly transportation services to bus homeless students to schools outside of the local school district. We are thankful that the Legislature followed your lead and increased fiscal 2016 funding by $1 million, with an appropriation of $8.35 million (7035-0008). According to the most recent DESE projection, full funding of the mandate would require well over $20 million in fiscal 2017. We know that your long-term priority and focus is on reducing the number of homeless families in hotels and motels, which is the ultimate solution. In the meantime, though, the $8.35 million will present ongoing financial challenges in impacted communities.

Kindergarten Expansion Grants
Cities, towns and regional school districts across the Commonwealth use the important Kindergarten Development Grant program (7030-1002) to support full-day access to local kindergarten programs. Unfortunately, H. 5540 would eliminate the entire $18.6 million program that 164 communities and school districts across the state rely to maintain their existing kindergarten offerings. All of these communities have already adopted their fiscal 2017 budgets, and this last-minute cut will force mid-year reductions in classrooms and school programs.  While there is no action to be taken in H. 4450, we are noting this issue because it will have a significant impact on so many cities and towns throughout the state. 

Out-of-District Vocational Education Student Transportation
This account (7035-0007) recognizes the significant cost to cities and towns of transporting students to out-of-district placements in vocational schools, as mandated by state law. Communities are required to send in-district students to out-of-district vocational schools if their systems do not match the students’ vocational education program interest. H. 4450 provides $250,000 for this purpose, which funds a small portion of the transportation costs that communities are required to incur when they comply with this state-set obligation.  

Shannon Anti-Gang Grants
The Shannon Grant program has been very effective in enabling cities and towns to respond to and suppress gang-related activities. We support the appropriation of $6 million (8100-0111) to keep this important program moving forward, and thank you again for proposing $7 million in your House Two budget submission. While it is unfortunate that funding will drop somewhat in fiscal 2017, it is important to continue funding the initiative, so that much of the good work can continue.

Safe and Successful Youth Initiative
Please support the appropriation (4000-0005) of $6.56 million to provide funding for the Safe and Supportive Youth Initiative. The program seeks to reduce youth violence through wrap-around services for those most likely to be victims or perpetrators, and is vital to violence prevention efforts in dozens of communities.

Summer Jobs for At-Risk Youth
Please support the appropriation (7002-0012) of $10.2 million to provide funding for youth summer jobs. This program is critical to providing employment opportunities for at-risk teenagers in our cities and towns, especially with youth unemployment rates climbing.

Community Preservation Act Funding
During fiscal 2015, 156 cities and towns collected the local Community Preservation Act (CPA) surcharge and are eligible for state matching grants in fiscal 2016. The Division of Local Services (DLS) estimates that the balance in the state trust fund will be sufficient to provide a first round match of only 18 percent of the surcharge levied by each city and town.  This would be the lowest state match in the program’s history. We strongly support Section 159, which would provide up to $10 million from any fiscal 2016 year-end surplus to supplement the state match. This is the approach that state leaders have embraced in recent years, and this has leveraged great work at the local level on open space protection, housing and historic preservation. 

Low-Income Student Count Provision for MSBA Program
Please support Section 160 in H. 4450 that would temporarily require the Massachusetts School Building Assistance (MSBA) program to accommodate the ongoing work to appropriately count low-income students. Without this provision, those communities that would have been disadvantaged in Chapter 70 by DESE’s recent change in the method of counting low-income students would also see a decline in their allowable MSBA reimbursement rate, which would greatly increase the local cost of building or rebuilding their schools. 

This is a critical time for our economy, and for cities, towns and local taxpayers, and we thank you for your efforts to advance a strong state budget plan that invests in our communities, and for your leadership in promoting a powerful state-local partnership. The Massachusetts economy will only reach its full potential for statewide growth and job creation if all 351 cities and towns have the resources to adequately serve the residents and businesses of the Commonwealth. This is why we respectfully ask that you approve the local aid investments detailed above, and support policies to protect municipal authority and resources, which is why we ask you to veto Section 45.  

Please do not hesitate to have your office contact us at any time if you have any questions or need additional information.

Thank you very much for your support, dedication and commitment to the cities and towns of Massachusetts.


Geoffrey C. Beckwith
MMA Executive Director & CEO

cc: The Honorable Karyn Polito, Lieutenant Governor of the Commonwealth
Secretary Kristen Lepore, Executive Office for Administration and Finance
Senior Deputy Commissioner Sean Cronin, Division of Local Services